DONALD
DUCK PAYS HIS TAXES

When
you pay your taxes this year, give thanks to Walt
Disney and Donald Duck. Once upon a time, there was
no income tax. However, in 1942, things
changed.

A
year after the United States joined the Second
World War, Uncle Sam was strapped for cash to pay
for the war effort. The voluntary income tax had
been in place for 29 years, but for Constitutional
reasons, fewer than 11 percent of Americans had to
pay the income tax at that time. As a result,
Congress enacted into law the Victory Tax Act of
1942, which included concurrent law for automatic
wage withholding. The government attempted to
legitimize these new laws by citing Article 1,
Section 5, Clause 2 of the Constitution: "To
support Armies but no apportionment for money to
that useshall be a longer term then 2
years."

This
new income tax, like the Federal income tax already
in existence, was delegated to the Department of
Treasury. Hence, it violated the Constitution by
ignoring the "separation of powers" clause by
giving a Congressional power to an Executive
delegate. This specific transfer of power was
determined as unconstitutional by Congress on
September 14th, 1787, when a motion was proposed to
transfer the power of tax collection from Congress
to the Treasury Department. That motion was
declined.

The
new legislation gave Henry Morganthau, then
Secretary of the Treasury, the two voluntary income
taxes that he needed Americans to voluntarily
comply with. In December, 1942, Morganthau came up
with a brilliant idea to encourage Americans to
part with their money: by making the income tax a
patriotic duty. To help implement this idea,
Morganthau had John J. Sullivan, a Treasury
Deptartment official, contact Walt Disney. Walt was
asked to fly to D.C. to discuss an urgent special
request. At first, Walt was reluctant, but Sullivan
insisted until Walt agreed. Sullivan did not
disclose the purpose of this meeting, and Walt
assumed it had to do with the promotion of War
Bonds. The next day, when Mr. Disney arrived to
meet with Morganthau and Internal Revenue
Commissioner Guy Helvering, it was announced that
the U.S. wanted Walt to "help us sell people on
paying the income tax." Confused, Walt questioned
why the government just didn't jail people who did
not pay the income tax. Mr Helvering retorted,
"Walt, we want people to be enthusiastic about
paying their taxes." Walt did not know that an
unconstitutional income tax could not be used to
jail American citizens for non-payment.

Walt
headed back to California with a six week deadline
to make a short film and get it into the theaters
in February of 1943. Production on other projects
was dropped, and a full time work force labored
around the clock on the new film. When the
preliminary storyboards were completed, Walt headed
back to Washington to preview them to
Morganthau.

The
story started with Donald Duck, a patriotic little
fellow reluctant to pay income taxes. Listening to
a radio broadcast about taxes, Donald progressively
realized that paying the income tax would help win
the war. With a whole new attitude, Donald quickly
goes to work filling out his income tax return.
Donald becomes so enthusiastic about paying the tax
that he races from California to Washington to
submit his tax return in person.

Walt
had finished his presentation. There was a brief
silence and Morganthau's secretary spoke out that
she hated Donald Duck. An aide stated that he
expected to see "Mr. Average Taxpayer." Mr.
Morganthau made no comment. Insulted and very
angry, Walt defended his project and argued that
using Donald Duck was like MGM loaning the talents
of Clark Gable to the film project THE NEW SPIRIT
because Donald was Disney's biggest star at the
time. In addition, brother Roy in a memo to Walt
had pointed out that since the short was being
given to theaters free, the theaters who already
had booked in Disney shorts would cancel and
replace it with the free short. (This warning
proved true and the Disney Company eventually lost
over $40,000 in bookings when theaters cancelled
which was a harsh blow since the Disney Studio
started the fiscal year over a million dollars in
debt.)

Mr.
Morganthau eventually reluctantly approved the
short. Since income tax payments were due March 15
(back in those days), the Disney Studio had to rush
to put together the short in record time since the
Treasury Department had not contacted the studio
until December 18, l942 Walt later sent a wire to
the Undersecretary of the Treasury stating: "From
time story was phoned from Washington to completion
date and into laboratory totaled only four weeks.
This is fastest time ever made on any cartoon
production and the fastest service Technicolor has
ever given."

For
the purposes of the cartoon, tax experts determined
that Donald Duck was "unmarried but maintains a
home in which he supports three adopted nephews
under 16 years of age for whose maintenance he has
a legal and moral obligation." Donald listed his
profession as "actor" with an income of "$250l.00"
but as the head of the family he was entitled to
certain exemptions and dependent credits, so his
taxes came to only "$l3.00". (Donald's shout of
"Taxes to beat the Axis" underscored the patriotic
need to pay taxes.) Walt ordered a full scale
publicity campaign to coincide with saturation
bookings at theaters. THE NEW SPIRIT was an instant
success and Walt had agreed to make it "without
profit" as he had for all the war related work the
Disney Studios did. The Treasury Department
estimated that 60 million Americans saw the film,
and a Gallup Poll indicated that voluntary
submission to the income tax increased 37 percent.
Along with "Der Fuehrer's Face," another Donald
Duck propaganda film THE NEW SPIRIT was even
nominated for an Academy Award in documentary short
subjects in 1943!

After
the Treasury Department collected billions of
dollars in new revenue, Walt Disney submitted his
bill for $80,000. ($40,000 for the cost of
producing the short and $40,000 for print costs. In
fact these sums didn't even cover the production
costs, merely some of the overhead.) The Treasury
Department did not actually have these funds and
Morganthau had to submit a request for the money to
Congress in a defense appropriations bill. Walt was
accused in Congress of being a war profiteer.
Republican John Taber from the House of
Representatives declared: "Can you think of
anything that would come nearer to making people
hate to pay their taxes than the knowledge that
$80,000, that should go for a bomber is to be spent
for a moving picture to entertain people?" Democrat
Clarence Cannon challenged the Republicans by
pointing out that Disney had donated his services
free of charge and that the film normally would
have cost $150,000 and that the film was an
effective way of spreading the message. The House
of Representatives disagreed and disapproved the
appropriation on a vote of 78 to 63.

The
newspaper coverage stirred public furor and the
Disney Studio was flooded with negative letters
often with the phrase "Not a dime for Disney". A
Rhode Island woman complained to Walt that "Had you
GIVEN it, your name would have been venerated, even
if it is a quack, quack cartoon." The Disney Studio
was forced to write off the venture as a loss. In
1943, the Treasury Department again approached Walt
to make another short cartoon to encourage
Americans to pay their taxes. Entitled THE SPIRIT
OF '43 the short shows Donald torn between a
thrifty patriotic duck (who resembles an early
Scrooge McDuck) and a spendthrift, zoot-suited duck
obviously with Nazi leanings. They are battling
over what Donald should do with his paycheck.
Donald eventually smacks the free spender and runs
off the pay his taxes. This time the Treasury
Department asked Congress first and they approved
$20,000. That sum was not enough to make a new
cartoon so some elements from the previous THE NEW
SPIRIT were reused.

Although
it didn't generate the publicity of THE NEW SPIRIT,
THE SPIRIT OF 43 is actually a stronger film with a
clearer storyline. So as you struggle with your tax
forms this year, remember the spirit of Donald
Duck.